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By Rod Nickel and Anthony Esposito
WINNIPEG/SANTIAGO, April 6 (Reuters) - Dealers of used mining equipment, from the United States to Chile and Australia, are making a risky bet that an end to the industry's four-year slump may be in sight, stocking up on a glut of crushers and conveyors.
Inventory is piling up as mines close or production slows. Buyers are especially scarce for highly specialized mineral-processing equipment, dealers say.
"We're being flooded with machinery," said Eduardo Bennett, business manager for Chilean used equipment seller Copal.
The equipment glut is depressing prices as much as 20 percent, Bennett said.
A used 20-ton Komatsu Ltd 6301.T bulldozer that sold for nearly $130,000 a few years back, now leaves the lot for $100,000, for example.
Executives from across the global copper industry are meeting in Chilean capital Santiago this week for the annual Cesco/CRU conference, where concerns about China's slowing growth and subdued global metal demand are prevalent.
But some veterans of the used equipment industry, who have survived decades of commodity booms and busts, note that such deep pessimism tends to mark the bottom of the cycle. They expect the closing of high-cost mines and cuts to exploration budgets to tighten supply and reverse falling metals prices.
Used mining machinery dealers tend to be small and privately held, and some also deal equipment for construction and agriculture. Much of the equipment goes straight to auction, where it is sold to the highest bidder by companies including Ritchie Bros Auctioneers Inc RBA.TO and Iron Planet.
At half a dozen abandoned mines and several warehouses, California-based Machinery & Equipment Company Inc, established in 1938, owns more mining equipment than at any time in the last seven years.
While the company's results are private, the last such boom generated record sales for the company in 2007-09, said president Mike Ebert, who predicted another rebound may only be a year away.
"I wish we had unlimited capital to invest in this equipment - everything we did have in stock (those years) was sold at full price," Ebert said. "It is starting to feel better out there with an increase in inquiries."
Evans Equipment, a Missouri-based reseller of Caterpillar Inc (NYSE:CAT) CAT.N equipment, is carrying twice its normal inventory.
Co-owner Bryce Evans, who is banking on a mining rebound in 2018, said the fact that many struggling miners have delayed replacing equipment as commodity prices fell will also help.
"There is pent-up demand worldwide," he said.
BAD TIMING FOR MANUFACTURERS
For now though, the glut of used mining machinery, an approximately $23 billion sector according to Ritchie Bros Auctioneers, has made for bargain shopping. cheaply bought used equipment offers potential profit for re-sellers, it limits future sales upside for manufacturers like Joy Global Inc (NYSE:JOY) JOY.N and Caterpillar. They are part of a $70 billion to $75 billion global new mining equipment industry, according to S&P Global Market Intelligence.
"Their customers don't have nearly as much money as they used to and so I think customers will be fairly cost-conscious for the next several years," said Morningstar analyst Kwame Webb of the new equipment makers, which have already cut staff and curtailed operations.
Marcello Marchese, chief executive of Finning-CAT's FTT.TO South America unit said Chile's mining industry used to buy 280 to 300 units of large-scale equipment each year.
"Last year there were 90 total sold," he said.
The soft used equipment market is also bad for miners hoping to recover some costs from failed projects. Barrick Gold Corp ABX.TO , which suspended its Pascua-Lama gold and silver project in 2013, is trying to unload equipment originally earmarked for the mine.
Supplies are likely to expand in coming months as some of Australia's biggest projects reach completion, said Frank Lee, general manager of Ross's Auctioneers and Valuers, in Western Australia.
"Exploration and drilling has pretty much dried up, but the big thing has been the wind-down in expansions," Lee said, citing iron ore projects owned by Rio Tinto RIO.AX RIO.L , BHP Billiton BHP.AX BLT.L and Fortescue Metals Group FMG.AX .
The longer the mining slump drags on, the more likely that equipment available today will fail to meet future specifications on mine sites, Lee warned.
"Some of this stuff will just be scrapped."